Opinion: Richmond’s Mortgage Heist

New York University Law School professor Richard Epstein on a California city’s vote to use eminent domain to seize underwater mortgages. Photo: Getty Images

This transcript has been automatically generated and may not be 100% accurate.

I ... back to Opinion Journal why Mary Kissel ... switching now its huge domestic topics just when you think the housing market is recovering ... California steps and said it all up for everybody ... I've got new York University law professor and her fellow Richard Epstein here to explain richer ... reading alot about Richmond California ... it wants to seize underwater mortgages ... using eminent domain this is to help the housing market ... on Thursday a judge said this was ok how is this okay well the judge did not improve as he returned to Charles broader what he said was on the technical motion that you cannot count this particular ... initiative by Richmond Copas put into place in the boat's inside the car inside the ... council not been fully completed or think they we estimate ... that more portly they haven't started the initiation so what he's doing the same time backing will ... this is not right ... maybe these guys could dissolve so I don't have to issue a decision but it doesn't start anything on the merits one with the hope that he has is this unprecedented has anyone ever sees a mortgage before ... for profit ... on the is as far as I can tell is ... that a lot of exotic uses of the eminent domain power but this is not one of them is the brain power the single law professor ... it's a very on think and my view is even the Supreme Court ... as tolerant edges of government activity will strike this thing down when you are saying in effect is that this mortgages worse when we take it from you a hundred sixty thousand dollars what would turn around the present is anybody else is now worth a hundred ninety thousand dollars ... The Alchemist is found his match in the eminent domain gone ... by simply seizing putting it in the hands of the government to increase its tire bike twenty percent ... and it's just not going ... to put this in simple language what why would this be so damaging to the housing market ... if we allow cities ... to to go down streets and to say I won that war is in that Mortgage and that work well I mean what are the things to understand that these mortgages that they were held by local banks they would never do this ... but these mortgages the package to put into syndicates the syndicates are sold in complicated ways out this week ... and if in fact you can take bits and pieces ... out of any one of these particular packages for a fraction of its diet ... the people warm bond package don't know what are they getting a bunch of mortgages that are performing ... for the getting the right to receive I'm ... basically diminish phones out of the unmet demand situation so they can figure out how to price ... value could survive Richmond doing this alone but it would not be nice in fact ... Fannie Freddie is an asset with quarantine them all the does not put them in the pools of debated what you've got existing mortgages out there and pools of longer range to three or four five or ten of the cities including USA Detroit in the title wanted to this and the whole the whole secondary mortgage market falls to pieces ... if you cannot resell mortgages you want it to them ... the idea of the city saying you know what ... I would be transparent about this I act acts everybody ... in use that money ... and an offer to voluntarily by these comments with that be a better solution would be a better solution except for the people pay the taxes but let's just put it in the fall will what ... what happens is constantly There's a battle with respect and to me ... as to whether the losses to be concentrate on this person or that person ... or whether they should be put on the community of launched the advantage of putting them on the committee of lawyers in this place is not the size of the dollar since the half to both the tax increase in question ... is really easy devoted mission to save Make this other guy ... I was so lot harder for both the initiative to say when the time a cross sell to pay for this thing so instead they just wanna sees it because they only know that it's a sign that says to the citizens in state and people is this is the way of making a northbound situation would make them especially Truman's the PB Capital whose name was ... rich investors the top one percent and so you've learned that the courts outside the jurisdiction even though will benefits with glass inside the jurisdiction ... but if you actually follow the dictates many of the local scandal of the following observation ... I have to finance an expansion of my business I will never be able to get a loan from anybody ... because that affected not to be confident that I could repay which we have about thirty seconds left eye to the Supreme Court decision that kicked off all of these questions about the rights of government to take private property was the Keadilan decision ... if that came after the Supreme Court and you think they'll return on kilos a different issue is whether I'm you can take if you pay full compensation ... in this issue there's an open question as to whether or not when you just take money and which one party to another ... it's a public use because it's not like the lower land use transaction when will something ... but my view is to be struck down on the grounds that this voluntary market out there ... know willing seller will sell these things that these prices so you can condemn that they heard it hear first can seize mortgages for fun and for profit ... NYU law professor in Hooper Fallon Richard Epstein ... thank you so much for being on my pleasure ...